# Sample Tax Computation: Minimum Wage Earners under TRAIN

Pinoy Money Talk

Here is a sample computation showing the applicable tax rules for Minimum Wage Earners (MWE), as reiterated in BIR Revenue Regulations 8-2018.

#### Tax Rules for Minimum Wage Earners

From the Bureau of Internal Revenue’s (BIR) RR 8-2018:

Minimum wage earners shall be exempt from the payment of income tax based on their statutory minimum wage rates. The holiday pay, overtime pay, night shift differential pay and hazard pay received by such earner are likewise exempt.

#### Sample Tax Computation: Minimum Wage Earners

Sample Computation

Mr. X, a minimum wage earner, works for 123 Co. Mr. X is not engaged in business nor has any other source of income other than his employment. For 2018, Mr. X earned a total compensation income of P135,000.00.

a. The taxpayer contributed to the SSS, Philhealth, and HDMF amounting to P5,000.00 and has received 13th month pay of P11,000.00. His income tax liability will be computed as follows:

 Total Compensation lncome P135,000.00 Less: Mandatory contributions P5,000.00 Non-taxable benefits 11,000 16,000.00 TAXABLE INCOME P119,000.00 TAX DUE EXEMPT

CONCLUSION: Taxpayer Mr. X is exempt since he is considered a minimum income earner.

b. The following year, Mr. X earned, aside from his basic wage, additional pay of P140,000.00 which consists of the overtime pay (P80,000.00), night shift differential (P30,000.00), hazard pay (P15.000.00) and holiday pay (P15,000.00). He has the same benefits and contributions as in Example (a) above.

 Total Compensation lncome P135,000.00 Add: Overtime, night shift differential, hazard, and holiday pay 140,000.00 Total Income P275,000 Less: Mandatory contributions P5,000.00 Non-taxable benefits 11,000 16,000.00 NET TAXABLE INCOME P259,000.00 TAX DUE EXEMPT

CONCLUSION: Taxpayer is tax-exempt as an MWE. The statutory minimum wage as well as the holiday pay, overtime pay, night shift differential pay and hazard pay received by such MWE are specifically exempted from income tax under the law.

Source: Bureau of Internal Revenue (BIR www.bir.gov.ph), Department of Finance (DOF www.dof.gov.ph) Philippines

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